PV installations, technology, production and cost: Perspectives of the global solar industry by 2015

2010 is likely to go down as one of the PV industry’s finest year. After growing "just" 25% to 7.1 GW in 2009, 2010 should witness 14 GW of installations (possibly as high as 16 GW, depending on how good greed gets in Germany) - a year-on-year increase of 93% to 125%. This has meant rosy days for most suppliers for the better part of the year; almost all bankable module producers have been sold out for 2010 as early as the first quarter. Consequently, wafer, cell, and module prices, which had been in free-fall for much of 2009, have stabilized across the value chain, and actually experienced a slight increase mid-way through 2010. In cooperation with GTM Research Solar Server's Solar Report in December 2010 sketches the highlights of this year's PV development and the global perspectives of PV industry.

First Solar already boasted thin film panel costs of less than $1/watt

Integrated PV production of REC in Singapore (August 2010)

Global solar photovoltaic (PV) panel production will eclipse approximately 15 gigawatts (GW) this year according to GTM Research’s latest report "PV Technology, Production & Cost Outlook: 2010-2015". While subsidy cuts in key markets will lead to slower growth in 2011 and beyond, panel production will still exceed 25 GW by 2013, GTM Research reports. At the same time, increasing competition between suppliers due to GTM Research will lead to panel prices of less than $1/watt by 2012 for select technologies.

"The supply chain has been bombarded with opportunities from scaling demand, and the industry has responded to this competitive dynamic with new, low-cost technologies and more sophisticated business models", the market research company emphasizes.

Global PV industry becomes more complex and dynamic than ever before

"Over the past 18 months, we have witnessed the global PV industry became more complex and dynamic than ever before", said Shyam Mehta, the report’s author and a Senior Solar Analyst at GTM Research. "The supply chain has been bombarded with opportunities from scaling demand, and the industry has responded to this competitive dynamic with new, low-cost technologies and more sophisticated business models."

PV panel prices to achieve US$1/watt milestone by 2012

The industry’s increase in production capacity is also spurring global price competition between PV technologies. While First Solar boasted thin film panel costs of less than $1/watt in early 2010, the GTM Research report forecasts the industry will reach its next economic milestone by 2012 when panel prices for the retail market will themselves fall below $1/watt. "Our global pricing analysis projects higher-cost panel producers to come under significantly more pressure in 2011 as PV continues to become more commoditized and low-cost manufacturers such as First Solar and top-tier Chinese firms add more capacity", said Mehta. "Whether it will be through product differentiation, contract manufacturing, technology innovation, or vertical integration, higher-cost producers will have to develop differentiated business models to stay alive in the long term."

PV competitive dynamics in 2011 and beyond: The battle resumes

As assessed in the "PV Technology, Production & Cost Outlook: 2010-2015" report, the top 15 most successful firms in terms of panel production, manufacturing costs, efficiency, and bankability by 2013 are ranked below, along with the location of their corporate headquarters:

1. First Solar (U.S.)

9. Solar Frontier (Japan)

2. Trina Solar (China)

10. SunPower (U.S.)

3. Yingli Green Energy (China)

11. Sharp (Japan)

4. Suntech Power (China)

12. Canadian Solar (Canada)

5. REC (Norway)

13. EGing Photovoltaic Technology (China)

6. Astronergy (China)

14. Abound Solar (U.S.)

7. Solibro GmbH (Germany)

15. Solarfun (China)

8. LDK Solar (China)

In its study GTM Research analyses cost, efficiency, bankability, and performance of companies like First Solar, Trina, REC, SunPower, Suntech, Sharp, and Solar Frontier to determine how they will stack up in 2011 and beyond.

Beyond 2010, however, things get murky -- every pundit, market researcher, hedge fund, and European Photovoltaic Industry Association on the planet has their own view on demand, and the variance is quite significant: forecasts for 2011 installations range from slightly down, to flat, to another 2010-like doubling. GTM Research's internal view is that demand for PV over the next two years will indeed continue to grow, but at a significantly slower pace, as large subsidy cuts in 2011 and 2012 will cause Germany to lose much of its luster as an attractive PV market. At the same time, Germany should still be a 5-GW-plus market in these years, and strong growth in the U.S., Italy, France, Canada, China, and Japan (as well as secondary markets such as Bulgaria and Belgium) will in part make up for this.

Net-net: 2011 demand is currently forecasted at 15 GW in 2011, only 6% higher than 2010, stepping up into 17% to 19% from 2012 onwards. As demand growth slows and low-cost, bankable producers continue to announce large capacity expansions (e.g., First Solar, Solarfun, Trina, Yingli, and Suntech): The next few years are likely to see looser supply-demand dynamics (although nothing as extreme as Q1 2009), and more heated competition between suppliers.

To gauge competitive dynamics, a quantifiable metric that incorporates all the relevant factors that come into play when a prospective module buyer makes his or her decision is essential. At the first order, these are (i) cost, (ii) efficiency, (iii) bankability, and (iv) performance, or kWh/kW yield (not always necessarily in that order).

In other words, it is necessary to estimate module manufacturing costs by company, and then adjust these for differences in the other three areas. Cognition is also needed to know how much available module supply each company is capable of contributing. In other words, it is imperative to construct an efficiency/bankability/performance-adjusted supply stack (or bid stack) for module suppliers. This is exactly what GTM Research’s "PV Technology, Production & Cost Outlook: 2010-2015" is set out to do.

The figure below presents the supply stack for 2011: it shows how much cumulative module supply (X-axis) comes in at or under a specific adjusted cost (Y-axis). As seen, the most competitive firms are the low-cost, bankable players such as First Solar, Trina, Yingli, and Suntech. In all, these suppliers will account for about 6 GW of supply in 2011, leaving the remaining 9 GW of the projected 15 GW to be competed for by the likes of the medium-cost but eminently bankable Sharp; SunPower; Tier 2 Chinese supply (Canadian Solar, LDK, Solarfun, and Jinko); higher-cost c-Si firms such as SunPower, Mitsubishi, Solarworld, and REC; and thin film firms such as Astronergy, Sharp (a-Si), Trony, and Abound. Some CIGS firms, as indicated by the red blocks, will be competitive (e.g., Solibro, Solar Frontier), but still will not be at sufficient scale to pose a competitive threat in 2011.

The 2013 supply stack, shown below, illustrates the evolution in competitive positioning of firms. More bankable low-cost Chinese c-Si supply moves to the front of the stack, given the disproportionately higher capacity ramps of players in this class. This, along with First Solar, makes up about 8 GW, or 38%, of the expected 2013 demand of 21 GW. The composition of the stack from 8 GW to 24 GW (the firms that will compete for most of the remaining demand) has notably more CIGS and c-Si supply from ROW locations (such as REC’s Singapore facility, shown in grey), as well as tandem-junction supply (Astronergy, Sharp, Mitsubishi Heavy, Auria Solar). Only a few developed-world c-Si producers (Sharp, Solarworld, Mitsubishi, Kyocera) are positioned competitively. Interestingly, SunPower’s position remains largely unchanged over time, due in no small part to continuing advancements in module efficiency.

The improving competitive positioning of alternatives to developed-world (EU/US/JP) c-Si is substantiated by their share of non Chinese c-Si/First Solar production, which is shown in the figure below.

From making up 53% of total non-Chinese c-Si/First Solar production in 2009, developed-world c-Si share is expected to fall to only 32% in 2013. It is displaced primarily by CIGS (3% to 18%) and tandem-junction Si (5% to 11%), while c-Si production in the rest of the world remains flat at about 1 GW throughout.

It will thus be a combination of the best European and Japanese c-Si firms, CIGS players, and tandem-Si players that will compete for the limited demand that low-cost, bankable Chinese firms and First Solar cannot satisfy over the next few years. The characteristics of the successful firms point to strategies and business models that will drive competitiveness in PV manufacturing over the next half-decade.

This article features excerpts from GTM Research's recently published global PV market research report,PV Technology, Production & Cost Outlook: 2010-2015.The report addresses technical characteristics, cost and pricing analysis and forecasts, facility-specific production and capacity data, supply-demand dynamics, and competitive positioning across all relevant PV technologies and nearly 200 wafer, cell, and module firms. For more on the report, gohere.